Updated from 2:13 p.m. EDT with new stock pricesFinancial stocks trailed the sinking broad market a day after Federal Reserve Chairman Ben Bernanke said the ongoing housing market turmoil will likely be a "significant drag" on the economy through early next year. Evidence of the crunch, meanwhile, continued surfacing in fresh third-quarter results. Mortgage-security writedowns and mushrooming credit losses
Out of earnings, CNBC reported that Merrill Lynch ( MER) CFO Jeff Edwards will "probably" be ousted from that position within the next few months for making upbeat comments on Merrill's financial health during a July conference call, less than three months before its announcement of
enormous third-quarter writedowns. CNBC cited "senior executives" at the firm. Merrill denied the report. Shares were down 2.46% to $71.79. Elsewhere in the red, Lehman Brothers ( LEH) slipped 2.66% after mortgage-lending unit Aurora Loan Services disclosed it had axed 160 employees in response to housing-market woes, and Navigators Group ( NAVG) lost 2.12% to $56.86 on a Friedman Billings downgrade to market perform from outperform. But Boston bank State Street ( STT) climbed 8.34% after third-quarter earnings totaled $1.15 a share, excluding one-time merger costs -- 21 cents better than the average analyst call, and 38.6% higher than last year. Revenue rocketed 47.9% year over year to a better-than-expected $2.24 billion. Shares gained $5.75 to $74.68. SCPIE ( SKP) was one of the sector's biggest price gainers after The Doctors Company agreed to buy it for $28 a share in cash, or roughly $281 million. Shares of the Los Angeles insurer surged 23.09% to $27.19 in light trading. Finally, Bear Stearns ( BSC) gained ground on news that China's Citic Bank is in talks to take a stake in the New York firm, whose pair of troubled subprime mortgage-focused hedge funds made the broker one of the hardest hit by the credit crisis. Shares tacked on $2.36, or 1.96%, to $123.05.